Which of the following statements regarding bonds payable is true?
a. Generally, bonds are issued in denominations of $100.
b. When an issuing company’s bonds are traded in the ‘secondary” market, the company
will receive part of the proceeds when the bonds are sold from the first purchaser to the
second purchaser.
c. A debenture bond is backed by specific assets of the issuing company.
d. The interest rate in the bond contract is called the stated rate.
Measures the company’s ability to meet its maturing debt obligations Match these terms
with their correct definition.
a. Cash flow adequacy ratio
b. Cash flows from financing activities
c. Cash flows from investing activities
d. Cash flow from operating activities
e. Direct method
f. Free cash flow
g. Income statement
h. Indirect method
i. Noncash investing & financing activities
j. Statement of cash flows
Refer to Fireworks City. Using the data for 2013, determine the average age of the
company’s property, plant, and equipment.
Fireworks City Information for 2013 and 2012 is presented below for this company
which uses the straight-line depreciation method.
a. 1.60 years
b. 2.50 years
c. 4.00 years
d. 10.00 years
Which of the following best describes “cost of goods available for sale”?
a. Cost of goods available for sale is an expense account.
b. Cost of goods available for sale is added to beginning inventory to determine cost of
purchases during the period.
c. Cost of goods available for sale is subtracted from net sales to arrive at the gross
margin.
d. Cost of goods available for sale is allocated into cost of ending inventory and cost of
goods sold.
Commissions earned by sales people
Match the most probable matching method to the costs listed. (Choices may be used
more than once.)
a. Directly match a specific revenue
b. Indirectly match with the period during which it will provide revenue
c. Not recognized in this period
Name given to the investee when an investor owns over 50% of the investee’s
outstanding common stock
Match the following terms to their correct definition:
a. equity security j. held-to-maturity securities
b. debt security k. amortized cost method
c. passive l. fair value method
d. significant influence m. unrealized gains and losses
e. control n. equity method
f. parent o. consolidation worksheet
g. subsidiary p. minority interest
h. trading securities q. business combination
i. available-for-sale securities r. Goodwill
Trattoria, Inc. engaged in the following investment transactions during 2013:
At December 31, 2013, the market value of Tarbet’s stock was $54. A) Prepare journal
entries to record this investment assuming management intends to hold this investment
for less than a month.
B) Calculate the market value of the company’s investment at December 31, 2013.
C) Prepare the necessary journal entry at December 31, 2013.
D) How should this investment be disclosed in the December 31, 2013 financial
statements?
The amount that must be repaid at maturity. Match these terms with their definitions.
a. Bond i. Lessor
b. Contract, coupon, stated rate j. Leverage
c. Discount k. Long-term debt
d. Effective interest rate method l. Market rate, yield
e. Face value, par value, principal m. Maturity
f. Interest amortization n. Premium
g. Lease o. Straight-line method
h. Lessee
Provides information that can be used to judge a company’s ability to meet its
obligations and pay dividends. Match these terms with their correct definition.
a. Cash flow adequacy ratio
b. Cash flows from financing activities
c. Cash flows from investing activities
d. Cash flow from operating activities
e. Direct method
f. Free cash flow
g. Income statement
h. Indirect method
i. Noncash investing & financing activities
j. Statement of cash flows
Which of the following is the correct entry to establish a petty cash fund in the amount
of $300?
a. Cash 300 Petty Cash Fund 300
b. Petty Cash Fund 300 Cash 300
c. Miscellaneous Expense 300 Petty Cash Fund 300
d. None of these, as no entry is necessary to record an exchange of cash.
Which of the following is not an investing activity?
a. Purchase of investments for cash.
b. Purchase of equipment for cash.
c. Sale of merchandise for cash.
d. Sale of land for cash.
Amounts collected from customers in advance. Match each of the following current
liabilities with its meaning.
a. Account payable
b. Note payable
c. Wages payable
d. Interest payable
e. Sales taxes payable
f. FICA taxes payable
g. Unemployment taxes payable
h. Unearned sales revenues
i. Estimated warranty liability
The statement of cash flows helps users understand the reasons for the differences
between net income and related cash receipts and payments.
The ____________________ is a list of all the accounts used by an entity.
Measures of ____________________ evaluate how efficiently a company uses its
assets, that is, the average length of time required for assets to be consumed or replaced.
A corporation may become chartered by applying to the federal government.
____________________ are those investments and deposits with financial institutions
that are readily convertible into known amounts of cash and that have original
maturities of three months or less.
Refer to the partial balance sheet presented above for Glass Doctor. Compute the
following liquidity ratios for 2014 and 2013:
•Assume that Glass Doctor’s statement of cash flows presented cash flows from
operating activities of $204.6 million and $201.1 million for the years ended
December 31, 2014 and 2015, respectively. Comment on the direction and
significance of the change in the ratios from 2013 to 2014.
Most companies use the accrual basis of accounting because it is required under
generally accepted accounting principles.
Describe the process that allocates the costs of the tangible and intangible operating
assets to expense.
A company’s records indicate the balance in its checking account at the end of the
month is $5,671. Comparing the company’s records with the monthly bank statement
reveals several additional cash transactions, such as a bank service charge of $75, a
$4,000 note receivable collected by the bank plus interest earned of $100, and an NSF
check for $350. Determine the company’s adjusted cash balance and prepare the journal
entries necessary to adjust the account balance.